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Offshoring and directed technical change


Acemoglu, Daron; Gancia, Gino; Zilibotti, Fabrizio (2015). Offshoring and directed technical change. American Economic Journal: Macroeconomics, 7(3):84-122.

Abstract

We study the implications of offshoring on innovation, technology, and wage inequality in a Ricardian model with directed technical change. Profit maximization determines both the extent of off-shoring and the direction of technological progress. A fall in the offshoring cost induces technical change with an ambiguous factor bias. When the initial cost of offshoring is high, an increase in offshoring opportunities causes a fall in the real wages of unskilled workers in industrial countries, skill-biased technical change and rising skill premia. When the offshoring cost is sufficiently low, instead, offshoring induces technical change biased in favor of the unskilled workers.

Abstract

We study the implications of offshoring on innovation, technology, and wage inequality in a Ricardian model with directed technical change. Profit maximization determines both the extent of off-shoring and the direction of technological progress. A fall in the offshoring cost induces technical change with an ambiguous factor bias. When the initial cost of offshoring is high, an increase in offshoring opportunities causes a fall in the real wages of unskilled workers in industrial countries, skill-biased technical change and rising skill premia. When the offshoring cost is sufficiently low, instead, offshoring induces technical change biased in favor of the unskilled workers.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2015
Deposited On:03 Nov 2014 12:02
Last Modified:08 Dec 2017 07:30
Publisher:American Economic Association
ISSN:1945-7715
Publisher DOI:https://doi.org/10.1257/mac.20130302
Related URLs:https://www.aeaweb.org/forthcoming/output/accepted_MAC.php

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